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Economics and Business
14-11-2016
Jeff Gundlach sees relief for Treasury bonds after Trump-inspired tantrum

Jeffrey Gundlach of DoubleLine Capital, one of the few high-profile money managers to predict a Donald Trump win, on Friday suggested that the Treasury sell off that has hammered yields is about 80% done.


“We have really critical resistance on yields,” he told CNBC in an interview. “So I do think this rate rise is about 80% of the way through—at least this leg of it.” Yields rise as debt prices fall.

Gundlach’s prognosis follows a selloff in the bond market by investors anticipating an accelerated rise in debt as President-elect Trump goes on a fiscal stimulus spree.

The 10-year Treasury yield TMUBMUSD10Y, +1.84%  jumped 33.5 basis points to 2.118% this week, according to Dow Jones data. The largest one-week rise since June 2013 pushed the 10-year yield to its highest close since Jan. 11. The bond market is closed Friday to commemorate Veterans Day.

The savvy investor, often referred to as the “bond king,” added that the collapse in Treasury prices is not surprising given the narrative that has emerged since Trump’s election.

Gundlach said he expects buying to revive once the 10-year Treasury yield hits 2.35%.

“We should get a tradeable rally off of that level,” he said. But if appetite for bonds does not materialize at that point, then the economy could be in trouble given how long rates have remained low.

The housing market would be among the first to be impacted as mortgage payments rise in line with higher rates. The stock market will also feel the effect as companies rethink buybacks and financial transactions, he said.

The rally in equities fueled by Trump’s upset has cooled on Friday but the S&P 500 SPX, -0.14% and the Dow Jones Industrial Average DJIA, +0.21%  are both on track for big weekly gains.



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